Trump fears sap EU digital tax plans

A top EU official Tuesday said the fear of retaliation by US President Donald Trump has blunted Germany's ambition for a European digital tax, with Paris and Berlin now proposing a scaled down version.

On Tuesday, France and Germany tabled a new plan that would see a three percent tax imposed on advertising sales on tech giants such as Google and Facebook, instead of the far wider scope of a doomed earlier proposal.

Paris believes a digital tax on the Silicon Valley behemoths would be a vote-getter for mainstream parties ahead of European Parliament elections next May in which anti-EU populists are expected to do well.

"Until now there has lacked a clear commitment by the Germans," said EU economics affairs commissioner Pierre Moscovici after talks in Brussels.

"There's an elephant in the room: the fear of trade reprisals by the Trump administration that might consider a tax as a protectionist measure against US high tech giants," he told reporters.

Germany especially fears damaging tariff hikes on vehicle exports to the US and top executives are expected in Washington on Tuesday to try to appease Trump and head off a trade war.

The digital tax initially was to cover a wide swathe of the digital economy, potentially capturing companies such as Amazon, AirBnB and Trip Advisor.

In the watered-down proposal, the scope of the tax would be largely limited to ads on Google and Facebook, which dominate the online advertising market in Europe and around the world.

The tax would only come into force in 2021 if a plan for a global solution being negotiated at the OECD is not agreed before then.

"I prefer to check our ambitions (...) We have adopted a more conciliatory attitude," French Finance Minister Bruno Le Maire told journalists after the meeting.

Le Maire's struggle was against Ireland and a group of mostly nordic countries that has furiously resisted an EU-only digital tax.

The new proposal, which requires unanimous backing by the EU member states, is set to be formally put for approval by ministers in March.